PMI Signals Buoyant Factory Output

01 Sep 2021 | 09.02 am

PMI Signals Buoyant Factory Output

AIB data shows inflationary pressures mounting

01 Sep 2021 | 09.02 am

Despite rates of growth slacking off, Ireland’s manufacturing boom continued into August, according to the latest AIB PMI, which shows that growth in in output, new orders, exports and purchasing remained among the highest ever recorded.

Any PMI result above 50 indicates overall improvement in the manufacturing sector, and it eased further from May’s record high to 62.8 in August, from 63.3 in July.

The AIB measure has signalled improving business conditions in the sector every month since October 2020.

All five components of the PMI made strong overall positive contributions. The 0.5-point drop in the PMI since July reflected the output and new orders components, though both remained at historically high levels. The employment, suppliers’ delivery times and stocks of purchases sub-indices all had positive directional influences in August, with the latter setting a new record high.

Chief economist Oliver Mangan said: “The AIB Irish Manufacturing PMI for August indicated another month of strong performance for the sector. While the headline index reading of 62.8 was lower than the 63.3 level recorded in July, it was still the fourth highest on record, consistent with a strong rate of improvement in manufacturing.

“The index has now remained above 60 for five consecutive months. The results from the data remain broadly in line with strong PMIs from some of the key advanced economies.

“The sub-components of the survey showed that while the rates of growth slowed since July, they remained among the strongest ever registered. Output rose for a sixth consecutive month, with firms noting rising demand as markets continued to reopen.

“Although the rate of expansion in new orders eased for the first time since growth resumed in March, it was still among one of the strongest ever readings. Meanwhile, employment rose for an eleventh month running, although some firms reported that hiring plans had been constrained to some degree by labour shortages.

“Amid the ongoing robust pace of growth in manufacturing activity, capacity constraints continued to be experienced. This was evident in another record increase in backlogs of work, which was attributed to a combination of demand pressures, supply chain delays and staff shortages. These factors contributed to ongoing upward pressure on both input and output prices.”

“Meanwhile, the 12-month outlook for production remained upbeat, but it was not as high as the level recorded in July.”

But there were complications in the rosy picture, too. Widespread raw material shortages and rising transport costs boosted inflationary pressure in August. Input price inflation eased further from June’s near-record high to a six-month low, but was still among the strongest ever. Output prices subsequently rose at the third-fastest pace on record, behind only those registered in June and July.

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